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Smart Management: The Innovation the Grantmaking Process Needs

(Beth Simone Noveck is director of the Governance Lab and a former U.S. deputy chief technology officer. Andrew Young is associate director of research for the Governance Lab. A version of this blog post first appeared in Governing.)

The way governments and many philanthropic institutions give out money to solve problems is stuck in the past.

Challenge.gov, which celebrated its fifth anniversary this fall, is a federal website that showcases requests by government agencies for the public to tackle hard problems in exchange for cash prizes and other incentives. Since its inception in 2010, agencies have run more than 450 challenges to help ameliorate problems such as decreasing the “word gap” between children from high- and low-income families or increasing the speed at which salt water can be turned into fresh water for farming in developing economies.

Certainly the time has come for innovation in grantmaking. Despite its importance, we have a decidedly 20th-century system in place for deciding how we make these billions of dollars of crucial public and private grant investments. To make the most of limited funding — and help build confidence in the ability of government and foundation investments to make a positive difference — it is essential for our government agencies and philanthropic institutions to try more innovative approaches to designing, awarding and measuring their grantmaking activities.

In most instances, grantmaking follows a familiar lifecycle: An agency describes and publicizes the grant in a public call for proposals, qualifying individuals or entities send in applications, and the agencies select the winners through internal deliberations. Members of the public — including outside experts, past grantees and service recipients — often have few opportunities to provide meaningful input before, during or after the granting process. And after awarding grants, the agencies themselves usually have limited continuing interactions with those they fund.

The current closed-door system, to be sure, developed to safeguard the legitimacy and fairness of the process. From application to judging, most government grantmaking has been confidential and at arm’s length. For statutory, regulatory or even cultural reasons, the grantmaking process in many agencies is characterized by caution rather than by creativity. Much of this description of the grantmaking process is also true of foundation philanthropy.

But it doesn’t always have to be this way, and new, more open grantmaking innovations might prove to be more effective in many contexts. Here are 10 recommendations for innovating the grantmaking process drawn from examples of how some government agencies, foundations and philanthropists are changing how they give out money:

The pre-granting process:

Use “ideation” challenges.Institutions can use “the crowd” to help formulate the problem a grant would be designed to solve.

Prioritize bottom-up participation.To break out of the traditional top-down approach, agencies may consider making bottom-up participation — a scientist engaging non-professionals in data gathering, for example — a condition of funding.

The granting process:

Create open peer review and participatory judging processes.More open judging can solicit public input at the outset to narrow a broad field or, later on, to select final winners from a shortlist.

Mobilize evidence-based grantmaking.Greater openness in grantmaking processes has the potential to lead to the availability of more and better evidence as to what works in practice.

Leverage expert networking, matching experts to opportunities.Advances in information-retrieval technology and the large-scale availability of relevant data about people’s skills have made it possible to automate the process of finding the right applicants or judges.

Explore open alternatives to traditional grants.Through crowdfunding, micro-payments and prize-backed challenges, government can use its convening power to harness more broad-based sources of funds.

The post-granting process:

Open up data about grants, grantors and grantees.Allowing others to easily discover what activities are funded has the potential to avoid duplication of investment, decrease fraud and abuse, enable better analysis of impact, and create a marketplace of non-winning proposals.

Standardize reporting.To make open grantmaking data more useful, it is important to develop more uniform reporting standards for grantors and grantees alike.

Open access to grant-funded solutions.Increasing access to the work product developed as a result of a grant helps ensure that the public can benefit from the knowledge that grantees produce.

All grantmaking organizations could benefit by taking a long, hard look at their existing procedures and determining how best to modernize and improve them, especially by throwing open the doors to more and more diverse participation.